The ROI of Employee Recognition

Recognise This! – Intangible benefits are as important as tangible results in calculating recognition ROI.

I recently had the opportunity to participate in an article in Premium Incentive Products magazine. Excerpts from “Beyond R.O.I.: Incentive & Reward Benefits Surpass Hard Numbers” appear below:

To calculate a simple return on investment, you subtract the programme cost from the programme benefit and then divide by the programme’s cost, “but it is in intangible areas, such as those that emphasise energising employees toward outstanding performance—or customer service—where human resource and C-suite business leaders still do not realise the number of ROI benefits that can be derived from a rewards (or recognition) plan,” said Derek Irvine, vice president of client strategy and consulting for Globoforce, a company with North American corporate offices in Southborough, Mass.

Those benefits include building and maintaining a strong global corporate culture, increased employee morale and engagement, and finally, the more tangible results in employee productivity and business performance….

It is always easier to measure an increase in sales or numbers in output and productivity,” Irvine, of Globoforce, said. “After all, with a sales incentive programme, you are usually rewarding on the basis of product sales or performance against goals.”

But it’s a more difficult task, he said, to measure the psychological aspect of recognition programmes, where leaders are reinforcing the right values and attitudes, and the programme is feeding psychological income needs and creating an engaged environment.

“This is why we need to focus so strongly on measurement of recognition, and how it impacts the bottom line,” Irvine said. “One obstacle, until recently, was the absence of technology to make this possible. But now, technology is allowing organisations to record and celebrate recognition with the same degree of depth as productivity, sales and revenues.”

Through easy-to-use, software as a service (SaaS)-based programmes, company leaders can recognise and engage employees through personalised gift cards and “thank yous” sent directly to the employee’s desktop.

“These timely and consistent recognition rewards are mapped to corporate values and strategic goals,” Irvine continued, “which helps employees understand how their personal and team achievements affect the company’s overall performance and bottom line.”

Employees are then recognised and rewarded when they achieve results the company has deemed appropriate to success, which transforms how a company’s culture is strategically and globally managed. …

Strategic recognition done correctly can result in an amazing return on the initial investment. The positive results of increasing employee engagement, improving loyalty and retention, and building culture, whilst at the same time increasing productivity and business performance, are all top priorities for companies today.

The only time you have a negative effect with an incentive programme is when people feel it is discretionary. So, ensure that you have clearly defined rules in an employee programme. You need to train managers and the supervisors who are providing the recognition, so that it’s very clear what types of behaviour they should recognise.

If people feel that it’s fair and that there is an equal opportunity to earn, they’ll continue to be engaged. And that’s a tremendous ROI.